The Applicability of the Porter Diamond’s Framework Essay

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1001-04
17 February 2017

The Applicability of the Porter Diamond’s Framework

The car industry contributes for 40% of German exports. Germany is the third world car producer and approximately 6 million cars are produced every year. Among these firms are the luxury firms such as BMW, Mercedes, Porsche and Audi. Let’s consider, first of all, the factors conditions in relation to the car industry.

These factors express the Nation’s position in factors of production such as unskilled labor, skilled labor, infrastructure, natural resources… * The industries are based on a high technological region, in the center of a zone of economic development. * Germany has always considered very important the transmission of scientific and technical knowledge: from the mid XIX century, a huge net of technical schools has been created (the Gewerbeschulen).

Those schools became later engineers school and technical universities. Today, Germany sustain this effort in favor of a “knowledge society” by taking measures such as the “Exzellenzinitiative” which is backed by Angela Merkel and allocate 1,9 billions in order to maintain German research among the top 3 in the world. This initiative wishes also to sustain the creation of clusters. * In Germany, approximately one job out of seven is linked (directly or indirectly) to the car industry.

The labor is very skilled. * Germany’s position is also an advantage: the country is in the heart of Europe and shares borders with many countries. * The transport infrastructure is optimal (railway, important harbors, road infrastructure…) The Demand conditions are another factor of the Porter’s diamond: * The local consumer is demanding: quality is very important * Huge population.

* The wage level is high among the population
* Increase of revenue levels in emerging countries. The demand abroad is high. The Related and supporting industries (clusters of industries) factors: * Presence of competitive suppliers
* Presence of clusters (and government incentives in order to develop them) * Presence of a labor market that develops specific skills relevant for the cluster Firm strategy, structure and rivalry factors:

* The four luxury brands are based in the same region. Therefore there is a strong competitiveness among them. However, each brand has a specific positioning. * The local context favors investments and constant improvements. Government:

* There are no speed limits in Germany therefore sport cars can be used to their full potential. * Incentives to sustain scientific development and the creation of clusters.